Currency wars leads to tradewars...

Today I wanted to write a little about how the currency wars leads to trade wars. This is sort of an english version of the swedish post I did earlier here, with maybe some further explanations:  http://rymdiz.blogspot.se/2012/05/valuta-krig-leder-till-handels-krig.html

The current currencywar is a race downwards as all countries wants to have the least valuable currency by extending the value, through creditexpansion and quantative easing. But why do countries want to have the cheapest currency? The answer is that it is because this makes them more likely to have more export, since its then is cheaper to buy from that country. It also makes all goods and services that are imported, more expensive for the people who lives in that country. So you could say that this race for the cheapest currency globally makes all goods more expensive for everyone everywhere. It brings on Inflation.

What it also means is that on the global scale, and in the global tradebalance, a country is dependent on having a positive tradebalance. It is because all the incoming money into a country or a region is based on the tradebalance. And it is the only "incoming" money that they have. Everything else is just a distribution of means within the country itself. But to create wealth beyond what you have in your own country, you need to have this taken from some other region. For more then 100 years the western world actively through this tradebalance got the means from third world countries through free labor and cheap goods. The last remain of the old, colonial world.

For a sustainable development alll countries would need to have a tradebalance around zero. For the European union it also means we still have a small, but still positive tradebalance but it is very close to zero. But regarding the USA they are running the biggest trade-defecit in the history of the world, and it means that they are always losing funds and means from their own country and giving their resources to china and other countries.

Next step when a currencywar is not working is to start a tradewar. A tradewar is when the countries put taxes on imported goods from other regions to make consumers at home buy products that are manufactured in their own country or region. USA recently decided to put a tax on imported chinese solarpanels. But this is just an example which other countries soon will follow. When other countries notice that actions are made to block trading, and their selling to that region. They to will make new laws and regulations to put taxes on the items they are buying from that region, in return. So it means this to is a race downwards as all regions starting taxing each others products to prevent trade. This too leads to more expensive goods for consumers everywhere. And in the end its a zero sum game.

Money is resources, and we cant create infinite resources on a finite planet. They can't create items and goods from thin air. Earlier when the BRIC countries were weaker they have accepted a tradebalance which were unfavourable to them, and thus they were slaves to the western world. But now finally the slaves are free.

Now noone can no longer live over their resources and means. So currencywars leads to tradewars but its all about conflicts of interest, silently playing out. The question is as resources become more scarce and these silent wars don't work to well. Will they build additional tensions, and later on start real wars for the resources? Will they try to enslave the other countries again? It is almost sure that wars are to follow the fall of the global economy.

Meanwhile the price of everything, for everyone, is set to skyrocket.